Goh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Anor

[2009] AATA 527

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 527

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   2009/0081

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SOOT HIN GOH SIEW CHING GOH

Applicants

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondents

DECISION

Tribunal Mr John Handley, Senior Member

Date16 July 2009

PlaceMelbourne

Decision

The value of the combined assets of the applicants shall include the sums described in documents lodged with the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC) on behalf of Jaytra Pty Ltd as follows:

(i)        2007 ‑ $14,425 being the profit from share transactions; and

(ii)       The sums of $127,666, $126,820 and $130,795 in the years respectively of 2006, 2007 and 2008 and described as monies held in the shareholders' current account as a loan.

The decision under review is affirmed

(Sgd)  John Handley
  Senior Member

SOCIAL SECURITY – Applicants sole directors and shareholders of a company – monies received from profit on share transactions – monies also described as loans to shareholders – whether these monies are income, assets and ordinary income of members of a couple constituting their combined assets in deciding asset values – whether overpaid Newstart Allowance and Age Pension – whether overpayments are a debt – decision under review affirmed

Social Security Act 1991 (Cth) s 8(1), s 9(1), s 11, s 122, s 1223, s 1236, s 1237A and s 1237AAD (b) and s 1237AAD (a) (i) AND (ii).

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Re Boyd and Secretary Department of Social Security [1994] AATA 580

Re Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225

Secretary, Department of Family and Community Servicesv Chamberlain [2002] FCA 67

REASONS FOR DECISION

16 July 2009 Mr John Handley, Senior Member           

1.      Mr and Mrs Goh, the applicants in these proceedings, applied to review a decision made by the Social Security Appeals Tribunal (the SSAT) on 2 December 2008.  The SSAT then made decisions with respect to the recovery of Newstart Allowance (NA) paid to Mr Goh and Age Pension (AP) paid to him and his wife by reason of their combined assets exceeding the asset value limits recorded within the Social Security Act 1991 (the Act).  The SSAT decision affirmed a decision previously made by an officer of Centrelink.  Decisions were also made by the SSAT reducing the rate of AP payable to the applicants between 10 June 2008 and 27 June 2008.

2.      The applicants appeared without a representative.  Mr Goh advocated the case of his wife and himself.  Mr Noonan appeared on behalf of the respondents.

3.      Prior to the hearing, Mr Goh prepared a number of written submissions extensively explaining the background to the matters which gave rise to the decisions made by Centrelink which involved a compilation of all jointly owned assets, excluding the matrimonial home.  Having placed a value on those assets, it was decided in the income years 2006, 2007 and 2008 that the value of the assets was in excess of the asset value limits.

4.      It was agreed at the commencement of the hearing that there was no dispute between the parties concerning the value of sundry assets being household contents, motor vehicles, amounts held in bank accounts and a superannuation investment.  Equally it was not in dispute that the applicants had failed to disclose, when asked in a number of questionnaires, that they had an interest in a private company.  Additionally it was not in dispute that the applicants had failed to respond to routine notification requirements of changes in combined assets.  It was agreed that the applicants, at all relevant times, were the sole shareholders and directors of Jaytra Pty Ltd (Jaytra).

5.      The issues in dispute were the characterisation of –

(i)Amounts of monies described in the income tax returns of Jaytra as loans to shareholders and their associates; and

(ii)The sum of $14,425 as recorded in the 2007 income tax return of Jaytra.

6.      Mr Goh said he had been engaged in a four year contract of employment in Canberra and upon his return to Melbourne he decided to sort out the share portfolio held by Jaytra.  He said that it had acquired mineral and mining shares in listed companies for many years previously and learnt that some of those companies had been acquired by other corporations.  He sold some shares and decided to have Jaytra purchase shares of exploration companies and ultimately achieved a return of profit of $14,425 in the 2007 year.  He said those monies should be regarded as capital profits, that the sum should be offset against previous capital losses incurred in the purchase and sale of shares and those monies should not in the circumstances be regarded as income.

7.      In cross-examination the applicant said he did not trade in shares but rather he invested as the director of Jaytra.

8.      I am satisfied that the monies achieved by the sale and purchase of shares constitutes income as defined at s 8(1) of the Act because they were monies earned, derived or received by the Company for its own use or benefit.  Additionally I am satisfied that the monies constitute a financial asset as defined at s 9(1) of the Act being a financial investment (also defined at s 9(1)) because they constitute available money.  I note in evidence that the applicant said that Jaytra did not trade but rather it invested.  Monies were received upon the investment, being the nett returns from the acquisition of shares.  An asset is defined at s 11 as either property or money.  The applicants are members of a couple and the persons beneficially entitled to the return achieved by Jaytra.  That return is a financial asset, being money within the definition of s 11.  Section 1077 provides that the applicants shall be deemed, jointly, to have received those monies as ordinary income, from those assets, the amount of which is brought into account when calculating the amount of a pension or benefit.  (Money is not defined.  It has a meaning well understood.  Ordninary income is defined at s 8 as being income that is not maintenance income or an exempt lump sum).

9.      In concluding this part I note at supplementary T‑document 5 that the sum of $14,425 is recorded in a profit and loss statement, completed by Mr Goh and lodged by him with the Australian Securities and Investment Commission (ASIC), as total income in the 2007 income year.  Nothing from the profit and loss statement or elsewhere indicates that any representations were made to have that sum regarded as a capital asset or to have it offset against previous capital losses.

10.     The other issue in contention is the characterisation of monies recorded in the income tax returns of Jaytra for the 2006, 2007 and 2008 income years as loans to shareholders and their associates being the sums of $127, 666, $126,820 and $130,795 in each of the respective years.  In the balance sheets lodged with ASIC on behalf of Jaytra, those three sums are recorded as liabilities of Jaytra and described as shareholders' current account.

11.     In those years Mr Goh said that those monies should be regarded as a notional loan.  He said Jaytra had previously borrowed monies from Citi Bank, secured against their domestic premises to permit them to trade.  Eventually their home was sold and the loan was discharged.  A net profit was made upon the sale and in a submission dated 20 March 2009 the applicant recorded:

We paid no money to Jaytra per se.  We paid Citi Bank to discharge our own dwelling house.  In creating Jaytra's debt to us there was no money paid into Jaytra neither was there any transfer of assets to Jaytra.  The loan was not created to increase Jaytra's assets.  It was to salvage what was left of our dwelling house.  As such there can be no money that may be recovered to speak of.  Had the loan been the result of us paying money or transferring assets to Jaytra then it is arguable whether or not the loan is recoverable.

12.     The explanations given at the hearing for the recording of the above sums in the income tax returns and in the balance sheets lodged with ASIC were in my view unsatisfactory.

13.     On the one hand Mr Goh made representations to the Australian Taxation Office (ATO) and ASIC that Jaytra held monies, described as liabilities and recorded as shareholders' funds.  That is to say, funds of the shareholders, being the applicants in these proceedings, were being held by Jaytra and were a liability of Jaytra.  Put another way, by the ATO return and the documents lodged with ASIC, Jaytra was in debt to the applicants.  In a questionnaire completed by Mr Goh on 1 June 2008 (supplementary T-document 4), he recorded (p255) in the 2007 income year that the sum of $126,820 was a loan owing to shareholder.

14.     For the purposes of this application, however Mr Goh said that Jaytra during the relevant years did not have any monies, but in a letter to Centrelink of 8 July 2008 (supplementary T-document 6 at p272) he recorded that Jaytra was liquidated on 25 June 2008, that it then had a debt of $130,795 owing to the Director/Shareholder, Soot Goh was completely written off.  I do not understand that submission.  That sum is identical to the amount recorded in the returns to the ATO and ASIC as shareholder funds and an amount owing to the applicants.  But in evidence Mr Goh said Jaytra did not have any monies and his written submission above recorded that monies were not paid into Jaytra.  If Jaytra did not have monies, there could be nothing written off.  If the monies, which I am satisfied were held for the applicants' benefit were written off it would constitute disposal of an asset for which no benefit would be achieved when calculating asset values.  Additionally, it would have the character of an unpaid loan (refer paragraphs 17 and 18 later).

15.     Mr Goh is an engineer.  He is not an accountant and without any disrespect (and in no way suggesting any dishonesty), it is evident that concepts of accountancy are foreign to him.  His evidence and the contents of the documents referred to above bear this conclusion.

16.     Consistent with the representations to the statutory agencies ATO and ASIC, on balance I am satisfied and find as a fact that in the three years in issue, monies were held by Jaytra and were held for the benefit of the applicants.

17.     Those monies are an asset within the meaning of s 11 of the Act (refer earlier).  Whilst it was the evidence of Mr Goh that those monies had not ever been paid to him or his wife, the combined value of the assets of the applicants will include the monies held in the shareholders' current account because it constitutes an unpaid loan as described at s 1122 of the Act.  That the sum has not been repaid is an irrelevance for the purposes of the section.  As was decided in the Tribunal decision of Re Boyd and Secretary Department of Social Security [1994] AATA 580 the value of the loan is the amount that remains unpaid.  In Re Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225 the Tribunal decided even if a loan cannot be repaid, the unpaid amount still is to be treated as an asset even if this produces unjust results . . .

18.     In concluding this part, the monies held in the shareholders' current account, constitutes a financial investment as defined at s 9(1) of the Act and in the circumstances of this application those monies are a loan that has not been repaid in full (refer sub-section (e)).

19.     In all of the circumstances the respondents are entitled to take account of the monies held in the shareholders' current account, as described in the taxation returns and the balance sheets lodged with ASIC and acknowledged in the questionnaire at supplementary T-document 4, in order to determine whether the applicants' combined assets have exceeded the applicable asset value limits.

20.     If the value of the combined assets did exceed the asset value limits, the applicants have received benefits to which they were not entitled.  That constitutes a debt (refer s 1223 of the Act).  There is no basis within s 1236 to have the debt written off.  Additionally the debt is not attributable to administrative error caused solely by the Commonwealth (refer s 1237A).  The debt can only be waived if it did not arise by reason of the applicants knowingly making a false statement or failing to comply with the Act (s1237AAD (a) (i) and (ii)) and then, if there are special circumstances applicable to them (refer s 1237AAD (b)).  The applicants cannot satisfy ss (a) but even if they could, I am not satisfied they can demonstrate special circumstances, being something that sets it apart from the usual or ordinary case (refer Groth v Secretary, Department of Social Security (1995) 40 ALD 541 nor could I be satisfied that repayment of the monies overpaid would be unfair or inappropriate (refer Secretary, Department of Family and Community Servicesv Chamberlain [2002] FCA 67). The applicants have assets both real and personal and it would not be inappropriate to determine that the availability of those assets permit the applicants to repay the sums overpaid (refer Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25).

21.     Accordingly the decision of the SSAT under review in these proceedings will be affirmed.

I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Mr John Handley, Senior Member

Signed:         Grace Carney Personal Assistant

Date of Hearing  30 June 2009
Date of Decision  16 July 2009
Solicitor for the Applicants        Applicants represented by Mr Goh
Departmental Advocate            Mr T Noonan